12 - Chapter 4

CHAPTER-4
FINANCIAL LITERACY:
MEASUREMENT AND EVIDENCES
4.1 Financial Knowledge Analysis
In this complex financial world, the knowledge and understanding of key financial
concepts is essential for individuals to make informed financial decisions. Financial
knowledge is one of the important components of financial literacy. The survey
instrument covers a variety of questions (displayed in Table 4.1) to measure the
financial knowledge of the respondents. The financial aspects that have been covered
include simple calculations, inflation, risk-return relationship and diversification.
4.1.1 Financial Knowledge Score
The level of financial knowledge possessed by the respondents is analysed on the

basis of eleven questions incorporated in the survey instrument. A judgment about the
financial knowledge of the respondents is made by assessing their numeracy skills and
understanding and knowledge about the basic financial concepts by asking the
questions on simple division; impact of inflation on prices, on returns and on standard
of living; computation of simple interest and compound interest; risk return
relationship and role of diversification in risk reduction.
Each question is given an equal weight in determining the financial knowledge. The
financial knowledge scoring followed the recommendations of OECD and some
Indian studies (Atkinson and Messy, 20121; Agarwalla, Barua, Jacob and Varma,
20122). The correct answer for each question carry one score with a maximum
knowledge score of 11. The financial knowledge score of the respondent is created by
counting the number of correct responses given by him. The respondents scoring 80
per cent or above were considered as highly knowledgeable who could handle the
challenges that comes in the way of financial matters. The respondents scoring
between 60-80 per cent are considered as having moderate financial knowledge.
Finally, the respondents who score less than 60 per cent are given low rating on
financial knowledge aspect. In this section, the empirical evidences regarding
financial knowledge of the respondents are reported.
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Table 4.1: Financial Knowledge Score
Questions asked in the questionnaire (correct response in bold Score for Score for
text)to examine the Financial Knowledge of the respondent Correct any other
answer response
Imagine that five brothers are given a gift of Rs.
1,000. If the brothers have to share the money
Division 1 0
equally how much does each one get? (Correct
answer: Rs. 200)
Now imagine that the brothers have to wait for one
year to get their share of the Rs. 1,000 and
Time Value of
inflation stays at 10 per cent. In one year’s time 1 0
Money
will they be able to buy: (Correct answer: less
than they could buy today)
You lend Rs. 25 to a friend one evening and he
Interest paid on gives you Rs.25 back the next day. How much
1 0
loan interest has he paid on this loan? (Correct answer:
0)
Suppose you put Rs. 100 into a <no fee> savings
account with a guaranteed interest rate of 2% per
Calculation of year. You don’t make any further payments into
Interest plus this account and you don’t withdraw any money. 1 0
Principal How much would be in the account at the end of
the first year, once the interest payment is made?
(Correct answer: Rs. 102)
And how much would be in the account at the end
Compound
of five years? Would it be: (Correct answer: More 1 0
Interest
than Rs. 110)
An investment with a high return is likely to be
high risk Or If someone offers you the chance to
Risk and Return make a lot of money there is also a chance that 1 0
you will lose a lot of money. (Correct answer:
True)
Definition of High inflation means that the cost of living is
1 0
Inflation increasing rapidly. (Correct answer: True)
It is usually possible to reduce the risk of investing
in the stock market by buying a wide range of
Diversification stocks and shares. Or It is less that you will lose 1 0
all of your money if you save it in more than one
place. (Correct answer: True)
Imagine that the interest rate on your savings
account was 1% per year and inflation was 2% per
Impact of
year. After 1 year, how much would you be able to 1 0
Inflation
buy with the money in this account? (Correct
answer: Less than today)
A 15-year mortgage typically requires higher
Compound monthly payments than a 30-year mortgage, but
1 0
interest (debt) the total interest paid over the life of the loan will
be less. (Correct answer: True)
If a single man currently has an income of Rs.10
000 a year, and inflation is 4%, how much income
Impact of
will he need in five years time to be able to have 1 0
inflation
the same living standard? (Correct answer: More
than Rs. 10000)
75
25%
High
Low
55%
Moderate
20%
Figure 4.1: Overall Financial Knowledge

Source: Survey
On the basis of the survey of whole sample, the scores of respondents on financial
knowledge are presented in Figure 4.1. The results show that 55 per cent of the
respondents score more than 80 per cent on financial knowledge aspect and are placed
in high financial knowledge category. However, the survey reports that one fourth of
the respondents of the whole sample appear in the moderate financial knowledge
category by achieving score between 60-80 per cent. In the low financial knowledge
category, there appear one fifth of the respondents. Overall, the evidences based on
the sample exhibits that majority of the respondents possess high level of financial
knowledge. Compared to the score of OECD countries (Atkinson and Messy, 2012)1,
the findings report better financial knowledge among the respondents in comparison
to most of the respondent countries of OECD survey.
100%
10%
Percentage of Respondents
90% 24% 7%
28% 33% 31%
80%
70% 13%
60% 16% Moderate level of financial
15%
50% knowledge
47%
40% 83% Low level of financial
30% 56% 63% knowledge
52%
20% High level of financial
10% 22% knowledge
0%
Bhiwani Fatehabad Hisar Rohtak Sirsa
Region
Figure 4.2: Region and Financial Knowledge

Source: Survey
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Figure 4.2 depicts the level of financial knowledge of the respondents on the basis of
region. The results show that high financial knowledge is possessed by 83 per cent of
the respondents from district Sirsa, which is the highest among all the districts. In the
high financial knowledge category, the lowest level of financial knowledge is
possessed by the people of Rohtak district (i.e. 22 per cent). The performance of
Hisar, Bhiwani and Fatehabad is better on this aspect as in all these districts, more
than half of the respondents have high financial knowledge.
The results report that nearly half of the respondents from Rohtak (47per cent) have
low level of financial knowledge. In this category, the proportion of respondents is 16
per cent for Bhiwani, 13 per cent for Fatehabad, 15 per cent of Hisar and 7 per cent
for Sirsa. The respondents who fall in the category of moderate financial knowledge
are 10 per cent in district Sirsa, 31 per cent in Rohtak, 33 per cent in Hisar, 24 per
cent in Fatehabad and 28 per cent in Bhiwani.
Overall, the survey indicates that the respondents from district Rohtak exhibits low
levels of basic knowledge of financial aspects as compared to other regions covered in
the survey.
100%
90% 22% 27%

80%
70% 19%
50% knowledge
40% Low level of financial
30% 60% knowledge
52%
10% knowledge
0%
Female Male
Gender
Figure 4.3: Gender and Financial Knowledge

Source: Survey
Figure 4.3 exhibits the financial knowledge scores of the respondents on the basis of
Gender. The results show that in the high financial knowledge category, the
proportion of female respondents (60 per cent) is higher than the male respondents
(52 per cent). Further, the proportion of female respondents is 19 per cent and of male
respondents is 20 per cent in the low financial knowledge category. However, the
77
survey reports that the proportion of male respondents (27 per cent) is higher than
female respondents (22 per cent) in the moderate financial knowledge category.
Overall, the survey indicates that a mild higher financial knowledge is possessed by
female respondents than the male respondents. The findings of the study are
contradicting the earlier findings that females’ financial knowledge is lower than the
financial knowledge of the male respondents (Atkinson and Messy, 20121; Agarwalla
et al., 20122). Probably, this may be due to be concerted efforts of the government for
removing the gender gap in education and various campaigns initiated for the
empowerment of women and the resultant improvement in their knowledge,
awareness and confidence.
100%
90% 19%
28%
80%
70% 28%
50% knowledge
30% 56% knowledge
54%
10% knowledge
0%
Rural Urban
Domicile
Figure 4.4: Domicile and Financial Knowledge

Source: Survey
Figure 4.4 displays the financial knowledge scores of the respondents on the basis of
their residence. It is evident from the results that high financial knowledge is
possessed by 56 per cent of the urban respondents and 54 per cent of rural
respondents. However, wide disparity is found in the results belonging to low
financial knowledge level. Twenty eight per cent of the rural respondents appear in
low financial knowledge category whereas the proportion is 15 per cent in case of
urban respondents. In the moderate financial knowledge category, the proportion is 19
per cent for rural respondents and 28 per cent for urban respondents.
Overall, the survey indicates that there exists a minor difference in the level of
financial knowledge possessed by the respondents on the basis of their residence.
Rural residents exhibit low level of financial knowledge than their urban counterparts.
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100%
Percentage of Respondents 90% 25% 26%
80%
70%
18% Moderate level of financial
60% 24%
50% knowledge
30% 57% knowledge
50%
10% knowledge
0%
Married Single
Marital Status
Figure 4.5: Marital Status and Financial Knowledge

Source: Survey
Figure 4.5 shows the financial knowledge scores of the respondents on the basis of
marital Status. The results show that in the high financial knowledge category, the
proportion of married respondents (57 per cent) is higher than the single respondents
(50 per cent). The survey reports that the proportion of married respondents (18 per
cent) is lower than single respondents (24 per cent) in the low financial knowledge
category. The results exhibit that in the moderate financial knowledge category, there
is a minute difference of one per cent in the proportion of married and single
respondents where the proportion is higher for single respondents.
Overall, the survey indicates that married respondents outscore single respondents on
the aspects of financial knowledge.
100%
90% 18% 18%

28% 26% 26%
80%
70% 20% 21%
60% 25%
50% knowledge
30% 56% 60% 62% 62% knowledge
49%
10% knowledge
0%
30-39 40-49 50-59 Above 60 Below 30
Age Group
Figure 4.6: Age Group and Financial Knowledge

Source: Survey
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their age. It is evident from the results that high financial knowledge is possessed by
more than 50 per cent of the respondents in all the age groups except the respondents
in below 30 age group where it is close to it i.e. 49 per cent. It also indicates that the
proportion of respondents with high financial knowledge goes on increasing with
higher age group. Moreover, in the low financial literacy category, the highest
proportion belongs to the respondents below 30 years of age i.e. 25 per cent. In the
moderate financial knowledge category, the proportion of respondents is 18 per cent
for the age groups above 60 as well as 50-59, 28 per cent for 30-39 and 26 per cent for
below 30 and for 40-49 age group.
Overall, the survey indicates that age appears as a significant factor affecting the
financial knowledge of the respondents as the financial knowledge of the respondents
tends to improve with age. This could be due to greater exposure of elder people with
respect to financial matters.
100%
90% 25% 25% 26%

80%
70% 14% 17%
60% 29%
40% knowledge
30% 61% 58% Low level of financial
20% 44%
knowledge
10%
Graduation Post Graduation Senior Secondary knowledge
or below Senior
Secondary
Education Level
Figure 4.7: Education Level and Financial Knowledge

Source: Survey
their education level. The results show that financial knowledge of the respondents
who are graduates or post graduates is higher than the respondents who have lower
educational level. In the high financial knowledge category, the highest proportion is
of graduate respondents’ i.e. 61 per cent which is slightly higher than the post
graduate respondents whose proportion is 58 per cent. But the proportion of
respondents with senior secondary or lower education is 44 per cent in high financial
80
knowledge class. In the low financial knowledge category, the highest proportion i.e.
29 per cent is of respondents in senior secondary or lower group in comparison to
graduates (14 per cent) and post graduates (17 per cent). In the moderate financial
knowledge category, there is not much difference in the financial knowledge level of
the respondents at different educational levels.
Overall, the survey indicates that education is a significant determinant of the

financial knowledge of the respondents as the highly educated respondents have
higher levels of financial knowledge. The results are in agreement with the earlier
findings that financial knowledge tends to improve with education.
100%
90% 25% 25% 26%

80%
70% 17% 18%
50% knowledge
40%
Low level of financial
30% 58% 57%
47% knowledge
20%
0% knowledge
Inpaid Not working Self Employed
employment
Work Situation
Figure 4.8: Work Situation and Financial Knowledge

Source: Survey
their work situation. The results show the absence of significant difference in the
financial knowledge of respondents who are in paid employment and those who are
not working. However, 47 per cent of the self employed respondents possess high
financial knowledge which is the lowest among the three work situations. In the
moderate financial knowledge category, there is mild difference in the proportion of
respondents who are in paid employment (25 per cent), not working (25 per cent) and
self employed (26 per cent). The proportion of self employed respondents is highest in
the low financial knowledge category i.e. 27 per cent while the proportion of in paid
employed respondents and not working is almost the same. This may be due to the
reason that working people have greater exposure and experiences related to financial
81
products and markets owing to their working life such as mandatory pension plans,
attending career courses and seminars etc. (MasterCard, 2014) 3.
Overall, the survey indicates that there exists a difference in the financial knowledge
of working and not working respondents.
100%
90% 25% 20% 27%

80% 39%
70% 13%
60% 33% 21%
50% 24%
30% 67% knowledge
52%
20% 42% 37%
0% knowledge
High level of financial
knowledge
Income Level
Figure 4.9: Income Level and Financial Knowledge

Source: Survey
Figure 4.9 shows the financial knowledge scores of the respondents on the basis of
their income level. Existing research shows a positive relationship between income
and financial knowledge of the people. Higher the income level, greater is the level of
financial knowledge possessed by the people. The same holds true in the survey
where the respondents in the higher income group i.e. more than `30000 have highest
proportion (67 per cent) in the high financial knowledge category while the same
group has lowest proportion i.e. 13 per cent in the low financial knowledge category.
High level of financial knowledge is possessed by 52 per cent for people belonging to
the income level of `20000-30000, 42 per cent of the people in income level of less
than `10000 and 37 per cent for people in income level of `10000-20000. The
proportion of respondents in the income level of less than `10000 is highest (33 per
cent) in low income level category whereas it is 24 per cent in case of respondents in
`10000-20000 income group and 21 per cent for respondents in `20000-30000
income group.
82
Overall the survey depicts that income level of the respondents has a direct
relationship with financial knowledge and thus, income is an important factor
determining the level of financial knowledge of the people in the selected areas.
100%
90% 23%
80% 33%
70% 18%
50% 26% knowledge
30% 59% knowledge
20% 41% High level of financial
10% knowledge
0%
No Yes
Income Stability
Figure 4.10: Income Stability and Financial Knowledge

Source: Survey
stability of their income. The results show a substantial difference in the financial
knowledge of stable and unstable income group. In the high financial knowledge
category, the higher presence i.e. 59 per cent is of the respondents whose income is
stable and regular while 41 per cent of the respondents whose income is not stable and
regular fall in this category. Low financial knowledge is possessed by 26 per cent of
the respondents having unstable and irregular income which is higher than the
respondents having stable income.
Overall, the survey indicates that there is significant difference in the financial
knowledge of the respondents on the basis of income stability. People having regular
stream of income are more likely to be in high financial knowledge category in
comparison to people with unstable income.
Figure 4.11 demonstrate the responses of the respondents regarding the financial
knowledge questions asked in the survey. The findings show that overall, majority of
the respondents seem to be knowledgeable about the basic financial topics e.g.
numeracy, interest on loan, inflation and knowledge of the relationship between risk
and return that high risk yield high returns. But their knowledge is less with regard to
complex financial concepts. Time value of money is the worst understood elements of
83
financial knowledge. Nearly half of the respondents are not able to calculate the
impact of time value of money though they understand the concept of inflation. More
than 40 per cent of the respondents are not able to perform calculations regarding
compound interest. Low levels of financial understanding are also found on the
benefits of diversification among 28 per cent respondents indicating their lack of
awareness about the fact that diversified portfolio is less risky than investment in
single asset. However, the percentage of respondents answering correctly on various
dimensions of financial knowledge is quite higher than the proportion of countries in
OECD survey.
Time value of money Calculation of interest

Division Interest paid on loan
FK2 plus principal
FK1 FK3
Correct response FK4
Correct response Correct response
48% Correct response
90% 87%
73%
Definition of
Compound interest Risk and return Diversification
inflation
FK5 FK6 FK8
FK7
Correct response Correct response Correct response
Correct response
59% 91% 72%
92%
Impact of inflation Compound Interest

Impact of inflation
on returns (debt)
FK11
FK9 FK10
Correct response
Correct response Correct response
75%
67% 70%
Figure 4.11: Question-wise Performance on Domains of Financial Knowledge

Source: Survey
4.2 Financial Attitude Analysis
Financial attitude is an important element of financial literacy which has an influence

on the financial behaviour of the people. Preference of people towards savings and
financial planning has long term consequences on their future economic well-being. If
they have positive attitude, they are more likely to have higher savings implying
hereby, more funds for future emergencies and less reliance on credit. But the
negative attitude towards these practices and the resultant negative behaviour will
leave the people vulnerable in difficult economic conditions and unexpected life
84
events. In this section, the empirical evidences regarding financial attitude of the
respondents are reported.
4.2.1 Financial Attitude Score
A total of three items as recommended by OECD, viz. preference to save and to

consume and preference to make long term financial plans; are employed to capture
the respondent’s attitude towards handling of finance. Accordingly, three scaled
attitudinal statements (displayed in Table 4.2) have been employed in the
questionnaire to make a judgment about the financial attitude of the respondents. The
responses of the respondents on each of the attitude statements are shown in the
Figure 4.12, 4.13 and 4.14.
Table 4.2: Financial Attitude Score

Questions asked in the questionnaire to examine the Score for Score for any
Financial Attitude of the respondent Completely other response
Disagree /
Disagree
Propensity to Save Money is there only to be spent 1 0
and Propensity to I find it more satisfying to spend
Consume money than to save it for the long 1 0
term
Extent of Belief in I tend to live for today and let
1 0
Planning tomorrow take care of itself
The attitudinal statements sought response in terms of degree of agreement or

disagreement on a 5-point scale. The responses have been coded as 1 for completely
agree, 2 for agree, 3 for neutral, 4 for disagree and 5 for completely disagree. The
financial attitude scoring followed the recommendations of OECD and some Indian
studies (Atkinson and Messy, 20121; Agarwalla et al., 20122). The score of the
respondents is created by adding together their scores on three attitudinal questions
and then divided by 3. A score of 4 and above signifies positive financial attitude of
the respondent while neutral financial attitude is represented by the score 3. The score
of 2 and less indicates negative financial attitude of the respondent.
Figure 4.12 displays the attitude of respondents towards money. Large proportion of
respondents disagrees (33 per cent disagree and 17 per cent completely disagree) and
85
are not in favour of the statement that money is there to be spent. While 40 per cent of
the respondents support the statement and are inclined towards consumption.
17% 11%
Completely Agree
19% Agree
Neutral
Disagree
33%
Completely Disagree
20%
Figure 4.12: ‘Money is there only to be spent’

Source: Survey
17% 16%
Completely Agree
Agree
Neutral
24%
Disagree
33%
Completely Disagree
10%
Figure 4.13: ‘I tend to live for today and let tomorrow take care of itself’
Source: Survey
The responses of the respondents towards the second attitudinal statement are shown
in Figure 4.13 which indicates people’s concern about future needs. The findings
reveal that 50 per cent respondents show their disagreement towards living for today
meaning hereby that they have a positive attitude towards long term planning.
Figure 4.14 exhibits the attitude of respondents towards savings and spending. 16 per
cent of the respondents find equal satisfaction from saving and spending. While more
than half of the sample respondents, with 36 per cent of the respondents disagreed and
16 per cent completely disagreed, with the statement. This shows their positive
86
attitude towards long term savings which is in fact essential for the financial well-
being of the people.
16% 9%
Completely Agree
23% Agree
Neutral
Disagree
36%
Completely Disagree
16%
Figure 4.14: ‘I find it more satisfying to spend money than to save it for the long
term’ Source: Survey
30%
Negative financial attitude
43%
Neutral financial attitude
Positive financial attitude
27%
Figure 4.15: Overall Financial Attitude

Source: Survey
The scores of financial attitude on the basis of all the respondents of the sample are
presented in Figure 4.15. The results exhibit that 43 per cent of the respondents of the
whole sample appear in the positive attitude category suggesting that these
respondents have a positive attitude towards savings and long term planning for the
future. Thirty per cent of the respondents have negative attitude towards financial
planning and propensity to save which is a matter of serious concern. Overall, the
evidences based on the sample show poor financial attitude of most of the Haryanvi
people.
87
100%
90%
30%
80% 46% 44% 43%
70% 52%
60%
50% 37% 19% Positive financial attitude
19% 28%
40% Neutral financial attitude
30% 30%
20% Negative financial attitude
33% 35% 38%
10% 28%
18%
0%
Region
Figure 4.16: Region and Financial Attitude

Source: Survey
Figure 4.16 displays the financial attitude scores of the respondents on the basis of
region. The results show that in the positive financial attitude category, the highest
score is obtained by Sirsa i.e 52 per cent followed by 46 per cent by Fatehabad, 44 per
cent by Hisar, 43 per cent by Rohtak and 30 per cent by Bhiwani which is the least
score. The presence of Sirsa respondents in negative financial attitude category is 18
per cent which is the least proportion and the maximum respondents in this category
are from Rohtak (38 per cent) and Fatehabad (35 per cent).
Overall, the survey depicts that Sirsa has the highest number of respondents with
positive attitude towards savings and planning for the long term, whereas Bhiwani
people are lagging behind the other respondents of the survey with respect to positive
financial attitude.
100%
90%
80% 46% 41%
70%
60%
50% 25% Positive financial attitude
40% 29% Neutral financial attitude
30%
34%
10% 25%
0%
Female Male
Gender
Figure 4.17: Gender and Financial Attitude

Source: Survey
88
Figure 4.17 represents the financial attitude scores of the respondents on the basis of
Gender. The results show that in the positive financial attitude category, the
proportion of female respondents (46 per cent) is slightly higher than the male
respondents (41 per cent). However, 34 per cent of the male respondents have a
negative financial attitude whereas the proportion is 25 per cent for the female
respondents. It suggests that female respondents have a better attitude towards savings
and financial decision making than male respondents. In the neutral financial attitude
category, the proportion of female respondents is 29 per cent while it is 25 per cent
for the male respondents.
Overall, the survey indicates a mild difference in the financial attitude of male and
female respondents where females show positive attitude towards finance than males.
100%
90%
80% 38%
70% 52%
60%
30%
26% 33%
10%
0%
Rural Urban
Domicile
Figure 4.18: Domicile and Financial Attitude

Source: Survey
Figure 4.18 shows the financial attitude scores of the respondents on the basis of
residence. It is evident from the results that in the positive financial attitude category,
the proportion of rural respondents is more than 50 per cent while it is 38 per cent in
case of urban respondents. The results show that 22 per cent of the rural respondents
and 29 per cent of urban respondents have neutral financial attitude. In the negative
financial attitude class, the proportion of rural respondents is 26 per cent which is
lower than the proportion of urban respondents who stand at 33 per cent.
Overall, the survey indicates that the attitude of rural respondents towards saving and
financial planning is superior to the urban respondents.
89
100%
90%
80% 36%
46%
70%
60%
40% 24%
30%
30% 30%
10%
0%
Married Single
Marital Status
Figure 4.19: Marital Status and Financial Attitude

Source: Survey
marital status. The results show that the proportion of married respondents (46 per
cent) is higher than the single respondents (36 per cent) in the positive financial
attitude category. However, similar proportion of married and single respondents (30
per cent) appears in the negative financial attitude category. Regarding the neutral
financial attitude category, the proportion of married respondents is 24 per cent and of
single respondents is 34 per cent.
Overall, the survey indicates that higher number of married people have positive
attitude towards financial aspects than singles. Thus, marital status seems to have a
significant influence on the financial attitude of the respondents. Perhaps marriage
makes the people more conscious towards their healthy financial future considering
the increased responsibilities.
their age. The results show that as we move from lower to higher age group, the
proportion of respondents in positive financial attitude class tends to increase. The
results depict that maximum respondents (71 per cent) in the age group of above 60
years have a positive financial attitude and this is the highest proportion among other
age groups in this category. In the positive financial attitude class, the proportion of
respondents is 60 per cent for the age group 50-59, 52 per cent for 40-49, 40 per cent
for 30-39 and 30 per cent for ‘below 30’ age group. The same tendency appears in
negative financial attitude class where the proportion of respondents’ declines with
90
increase in age group. Moreover, the proportion is lowest for the age group of above
60 and highest for the age group of below 30 years.
Overall, the survey indicates that age of the respondents is a significant determinant of
the financial attitude of the respondents and higher positivity is found in the attitude
of people falling in higher age group.
100%
90%
30%
80% 40%
70% 52%
60%
71%
60%
26%
30% 20%
20% 15% Negative financial attitude
34% 36%
10% 27% 20% 15%
0%
30-39 40-49 50-59 Above 60 Below 30
Age Group
Figure 4.20: Age Group and Financial Attitude

Source: Survey
100%
90%
80% 41% 33%
70% 65%
60%
50% 32%
40% 28%
Positive financial attitude
30% 15%
31%
0%
Graduation Post Graduation Senior Secondary
or below Senior
Secondary
Education Level
Figure 4.21: Education Level and Financial Attitude

Source: Survey
Figure 4.21 exhibits the financial attitude scores of the respondents on the basis of
their education. The result shows that a large proportion of respondents with least
educational qualification i.e. senior secondary or below senior secondary (65 per cent)
possess positive financial attitude which is the highest proportion in positive financial
attitude category among the three educational groups. Further, the findings report that
91
the proportion of respondents increases in the negative financial attitude category with
higher degrees of education. The results indicate better financial attitude among the
respondents with least education and maximum negative financial attitude among the
post graduates. Overall, the survey indicates that education does not make any
significant contribution in improving the financial attitude of the respondents.
100%
90%
80% 39% 45%
70% 51%
60%
40% 28% 23%
30% Neutral financial attitude
20% 34% 27% 25% Negative financial attitude
10%
0%
employment
Work Situation
Figure 4.22: Work Situation and Financial Attitude

Source: Survey
Figure 4.22 displays the financial attitude scores of the respondents on the basis of
their work situation. The results find that more than 50 per cent of the self employed
respondents have positive financial attitude which is the highest in all the three work
situations. The respondents who are in paid employment have the least proportion in
the positive financial attitude category i.e. 39 per cent. The proportion of in paid
employees is also the highest among the three groups in the negative financial attitude
category. In the neutral financial attitude class, the proportion of self employed is 23
per cent, of those in paid employment is 27 per cent and of not working respondents is
28 per cent.
Overall, the survey exhibits high positive financial attitude among the self employed
respondents. It also indicates that ‘working status’ of people has no effect on the
financial attitude of the people.
92
100%
Percentage of Respondents 90%
80% 35% 37% 37%
50%
70%
60%
50% 27% 27% 30%
40% 25%
30%
20% Positive financial attitude
38% 36% 34%
0%
Negative financial attitude
Income Level
Figure 4.23: Income Level and Financial Attitude

Source: Survey
Figure 4.23 shows the financial attitude scores of the respondents on the basis of their
income level. The results depict that the respondents whose household income
exceeds `30000 are more inclined to financial planning than the low income
respondents. In the positive financial attitude category, the highest proportion i.e. 50
per cent is of the income level of more than `30000. However, it is the same i.e. 37
per cent for the income level of `10000-20000 and of `20000-30000 and the lowest
proportion is shown by the low income group. Moreover, nearly two fifth respondents
with low income appear in the negative financial attitude category.
Overall, the survey depicts that respondents from high income group have high
positive attitude towards financial matters. The results indicate that high income is
associated with positive financial attitude.
stability of their income. The results show that respondents whose income is stable are
more likely to plan financially and prioritise savings over spending. Positive financial
attitude is depicted by 46 per cent of the respondents having stable income which is
significantly higher than the respondents having unstable income. In the Negative
attitude side, the presence of respondents having unstable and irregular income is 39
per cent which is much higher than the respondents having stable income (28 per
cent).
93
Overall, the survey indicates that stability of income influence the attitude of the
respondents positively.

90%
80% 33%
46%
70%
60%
40% 26%
30%
10% 28%
0%
No Yes
Income Stability
Figure 4.24: Income Stability and Financial Attitude

Source: Survey
4.3 Financial Behaviour Analysis
Financial behaviour is an indispensable element of financial literacy and probably the

most important one. This is because though people have the knowledge as well as
positivity in their attitude towards financial matters but their future financial well-
being depends on their behaviour towards utilizing money in their daily lives. The
positive outcomes will be achieved by the people only when the positive attitude and
high knowledge of the people is reflected in their behaviour. People having positive
behaviour towards savings, money management, financial planning and management
of current financial resources and less inclination on credit are more likely to have a
safe financial future. However, certain behaviours such as over use of credit, delayed
payments, no active savings can deteriorate the financial health of the households. In
this section, the empirical evidences regarding financial behaviour of the respondents
are presented.
4.3.1 Financial Behaviour Score
A total of six items are employed to accumulate information about the respondent’s
dealing with personal finances. Accordingly, the financial behaviour of the
respondents is measured by covering the aspects regarding household budgets,
affordability of products and management of expenditure, timely payment of bills,
efforts towards achieving financial goals, saving habits and borrowing tendency in the
94
questionnaire (displayed in Table 4.3). Out of the six questions included in the survey
instrument, 2 questions use a qualitative scale and 4 questions use 5-point Likert’s
scale of agreement. The responses of the respondents on each of the behavioural
questions are shown in the Figure 4.35.
Table 4.3: Financial Behaviour Score

Questions asked in the questionnaire to examine the Financial
Score
Behaviour of the respondent
Budgeting Is your family used to keeping records of
1 for keeping records, 0 otherwise
income and expenditures?
Affordability Before I buy something I carefully consider 1 for Completely Agree and
whether I can afford it Agree, 0 otherwise
Billing I pay my bill on time 1 for Completely Agree and
Behaviour Agree, 0 otherwise
Monitoring I keep a close personal watch on my financial
1 for Completely Agree and
Personal affairs
Agree, 0 otherwise
Finance
Long Term I set long term financial goals and strive to
1 for Completely Agree and
Financial achieve them
Agree, 0 otherwise
Planning
Active Saving In the past 12 months have you been 1 for active saving in bank,
Behaviour (personally) saving money in any of the bonds, investments, stock, shares,
following ways, whether or not you still have livestock, and property, 0
the money? otherwise
The overall behaviour score is obtained by combining the information on six items.
The financial behaviour scoring has been followed as per the recommendations of
OECD and some Indian studies (Atkinson and Messy, 20121; Agarwalla et al., 20122).
The maximum score that a respondent can achieve is 6. Respondents scoring 5 or
more out of 6 are classified as having positive behaviour towards money and finance.
Those scoring 4 are classified as neutral and less than 4 are considered as having
negative financial behaviour.
The scores of financial behaviour on the basis of all the respondents of the sample are
presented in Figure 4.25. The financial behaviour scores of the respondents show that
majority of respondents are behaving positively while dealing with financial matters.
On the basis of the survey findings, it is revealed that 64 per cent of the respondents
have gained high score on this dimension of financial literacy which is higher than the
proportion of respondents reporting positive financial behaviour in more than fifty per
cent countries covered in OECD survey (Atkinson and Messy, 2012)1.
95
Overall, the evidences based on the sample exhibited positive financial behaviour of
the respondents.
14%
Negative financial behaviour

22% Neutral financial behaviour
Positive financial behaviour
64%
Figure 4.25: Overall Financial Behaviour

Source: Survey
100%
90%
80%
70% 67% 63% 67% 60% 65%
60%
50% Positive financial behaviour
30% 26%
17% 26% 20% 21% Negative financial behaviour
20%
10% 16% 13% 14% 14%
11%
0%
Region
Figure 4.26: Region and Financial Behaviour

Source: Survey
Figure 4.26 represents the financial behaviour scores of the respondents on the basis
of region. The results show prevalence of positive behavioural skills in all the
respondents irrespective of their region. However, in the Positive financial behaviour
category, Hisar and Bhiwani has the highest proportion with 67 per cent respondents,
followed by Sirsa with 65 per cent respondents, Fatehabad with 63 per cent
respondents and Rohtak with 60 per cent respondents. In the Negative financial
96
behaviour category, the least proportion is of fatehabad (11 per cent) and highest is of
Bhiwani (16 per cent). The results depict that the financial behaviour of respondents
belonging to Hisar, Bhiwani and Sirsa is better than the respondents belonging to
Rohtak and Fatehabad.
Overall, the results indicate that majority of respondents from all regions behave
positively while dealing in financial matters.
100%
90%
80%
70% 65% 64%
60%
30%
21% 22% Negative financial behaviour
20%
10% 14% 14%
0%
Female Male
Gender
Figure 4.27: Gender and Financial Behaviour

Source: Survey
of gender. The results reveal no significant variation in the financial behaviour scores
of the respondents. In the positive financial behaviour category, there is a mild
difference of 1 per cent in the proportion of male and female respondents where
female respondents score high i.e. 65 per cent.
Overall, the survey indicates the absence of any significant difference in the financial
behaviour scores of the respondents on the basis of gender.
Figure 4.28 exhibits the financial behaviour scores of the respondents on the basis of
residence. The results show that in the Positive financial behaviour category, the
score of urban respondents (65 per cent) is slightly higher than the rural respondents
(62 per cent). However, the score is similar for urban as well as rural respondents in
the neutral financial behaviour category.
97
Overall, the survey indicates a comparative positive financial behaviour of urban
respondents relative to the rural ones.

90%
80%
70% 62% 65%
60%
30% 22%
10% 15% 13%
0%
Rural Urban
Domicile
Figure 4.28: Domicile and Financial Behaviour

Source: Survey
Figure 4.29 shows the financial behaviour scores of the respondents on the basis of
their marital status. The results show that 66 per cent of the married respondents and
60 per cent of singles appear in the positive financial behaviour category. The results
depict that the presence of married respondents (12 per cent) is lower than those of
singles (19 per cent) in the negative financial behaviour category.
Overall, the survey indicates that married respondents outperform single respondents
with regard to financial behaviour.
100%
90%
80%
70% 66% 60%
60%
30% 22%
10% 19%
12%
0%
Married Single
Marital Status
Figure 4.29: Marital Status and Financial Behaviour

Source: Survey
98
100%
80%
70% 65% 66% 62% 60%
71%
60%
30% 14% 21% 24%
20% 26% 17% Negative financial behaviour
10% 20% 18% 16%
9% 12%
0%
30-39 40-49 50-59 Above 60 Below 30
Age Group
Figure 4.30: Age Group and Financial Behaviour

Source: Survey
Figure 4.30 displays the financial behaviour of the respondents on the basis of their
age. The results show that in the positive financial behaviour category, all the age
groups have more than 60 per cent respondents. However, the age group 40-49 years
has the highest proportion in this category with 71 per cent respondents and the age
group of below 30 has the least i.e. 60 per cent in this category. It is also depicted in
the results that the proportion of the age group below 30 is 16 per cent, of the age
group 30-39 is 9 per cent, of the age group 40-49 is 12 per cent, of the age group 50-
59 is 20 per cent and of the age group above 60 is 18 per cent in the negative financial
behaviour category.
Overall, the evidences based on the sample indicate that age may not be a significant
determinant of positive financial behaviour.
100%
90%
80%
70% 61% 52%
60% 72%
50%
30% 21% 30%
20% 18% Neutral financial behaviour
10% 18% 18% Negative financial behaviour
0% 10%
or below Senior
Secondary
Education Level
Figure 4.31: Education Level and Financial Behaviour

Source: Survey
99
Figure 4.31 represents the financial behaviour score of the respondents on the basis of
their education. The results show that in the positive financial behaviour category, the
post graduate respondents have the highest proportion. In this category, the proportion
of post graduates is 72 per cent while the proportion of graduates is 61 per cent and
the proportion of respondents with the education level of senior secondary or below is
52 per cent. In the negative financial behaviour category, the proportion of
postgraduates is 10 per cent, of graduates and of those with senior secondary is the
same i.e. 18 per cent. It shows that the financial behaviour of post graduate
respondents is better than respondents from other categories, thus, supporting the
notion that education tends to improve the financial behaviour of the people.
Overall, the survey indicates that education has a significant influence on the financial
behaviour of the respondents.
100%
90%
80%
51%
70%
70% 66%
60%
50%
Positive financial behaviour
40%
30%
20% Negative financial behaviour
20% 20%
10% 22%
10% 14%
0%
employment
Work Situation
Figure 4.32: Work Situation and Financial Behaviour

Source: Survey
of their work situation. The results show that there is higher presence of respondents
who are working in the positive financial behaviour category. In this category, the
proportion of respondents who are in paid employment is 70 per cent, of self
employed is 66 per cent and of respondents who not working is 51 per cent which is
the least score in Positive financial behaviour category. In the Negative financial
100
behaviour category, the percentage of in paid employees is 10 per cent, of self
employed is 14 and of not working respondents is 22 per cent.
Overall, the survey indicates that the work situation is a significant determinant of the
financial behaviour of the respondents as the respondents who are working either in
paid employment or are self employed behave better in financial matters than not
working respondents.
100%
90%
80%
70% 60% 53%
69% 68%
60%
50%
40%
30% 22% 31% Positive financial behaviour
20% 20% 20%
18% 12% 16% 13%
0% Negative financial behaviour
Income Level
Figure 4.33: Income Level and Financial Behaviour

Source: Survey
of their income. The results reflect that people in the high income group are more
likely to behave positively while dealing with finance. In the positive financial
behaviour category, 69 per cent of the respondents with household income of more
than `30000 appear while the proportion is 53 per cent for the households with
income ranging between `10000-20000. In the negative financial behaviour class, the
minimum score i.e. 12 per cent is of the respondents who fall in the income level of
more than `30000 and the proportion tends to increase with decline in the income
level of the respondents. The result shows that positive financial behaviour is depicted
by the respondents who fall in higher income group. Moreover, the respondents
belonging to the income level of more than `20000 displayed better behaviour than
the respondents with low income.
101
The survey indicates higher income is associated with better positive financial
behaviour.
Percentage of respondents 100%

90%
80%
50%
70%
68%
60%
30% 34%
10% 16% 13%
0%
No Yes
Income Stability
Figure 4.34: Income Stability and Financial Behaviour

Source: Survey
Figure 4.34 shows the financial behaviour scores of the respondents on the basis of
stability of their income. The results indicate that in the positive financial behaviour
category, the proportion of respondents with stable income (68 per cent) is more than
the respondents whose income is unstable (50 per cent). It is also shown by the results
that in the negative financial behaviour as well as neutral category, the proportion of
stable income respondents are less than the unstable income respondents. It specifies
that the respondents whose income is stable are engaged in better financial behaviour
than the respondents whose income is not stable.
Overall, the results indicate that the stability of income affects the financial behaviour
of the respondents positively.
Figure 4.35 exhibits the performance of respondents on individual items asked from
them in the survey regarding financial behaviour. The results display that 95 per cent
of the respondents follow the practice of paying their bills on time. 92 per cent of the
respondents report that they consider their affordability before making purchases. A
large proportion of 87 per cent keep a personal watch on their financial affairs with
about 80 per cent display positive behaviour towards long term plans and work for
achieving the goals. All these responses exhibit positive behaviour of people in
managing their finances.
102
The results also highlighted the need of improving the financial behaviour of people
with respect to budgeting and active saving. The results reveal that 11 per cent are not
saving at all and out of 89 per cent, only 45 per cent are saving in productive saving
instruments. Moreover, 31 per cent of the respondents are not maintaining records of
their income and expenditure. This shows undisciplined behaviour of the respondents
towards these financial aspects.
100%
90%
80%
70%
60%
50% 92% 95%
40% 87%
79%
30% 69%
20% 45%
10% Correct response
0%
Figure 4.35: Question Wise Performance on Domains of Financial Behaviour

Source: Survey
4.4 Financial Literacy Analysis
Financial literacy is the knowledge and understanding of financial matters, positive

attitude towards finance and its execution with confidence for making informed
decisions in the financial market. In the study, financial literacy is analysed on the
basis of combined measures of financial knowledge, financial attitude and financial
behaviour. In this section, the empirical evidences regarding financial literacy of the
respondents are presented.
4.4.1 Financial Literacy Score
The financial literacy score of the respondents is obtained by adding their scores on
the three dimensions of financial literacy i.e. financial knowledge, financial attitude
and financial behaviour. The financial literacy scoring has been followed as per the
recommendations of OECD and some Indian studies (Atkinson and Messy, 20121;
103
Agarwalla et al., 20122). The maximum financial literacy score that can be attained by
a respondent is 22 (11 for financial knowledge, 6 for financial behaviour, and 5 for
financial attitude). The respondents are categorized in high financial literacy class on
gaining 80 per cent or above score, in moderate financial literacy class on getting 60 –
80 per cent and are considered as less financial literate if they score less than 60 per
cent.
High level of financial literacy

37%
44%
Low level of Financial literacy
Moderate level of financial

literacy
19%
Figure 4.36: Overall Financial Literacy

Source: Survey
The scores of financial literacy score of all the respondents of the sample are
presented in Figure 4.36. The results show that 37 per cent of the respondents fall in
the high financial literacy category which suggests that they are well equipped with
financial skills and knowledge and also seems to have positive attitude or behaviour
with regard to the financial matters. The rest 63 per cent respondents are lacking in
one or the other aspect of financial literacy with 19 per cent of the respondents who
are ill equipped with the financial skills essential for their financial well-being as they
appear in the category of low financial literacy.
Overall the results represent the poor state of literacy level of the people despite high
levels of financial knowledge and financial behaviour. The low level of overall
financial literacy is mainly accredited to the poor scores of the respondents on the
aspect financial attitude. Another responsible factor is lack of consistency in the
results of all the three dimensions of financial literacy among the respondents. Just 20
per cent of the respondents score high on all the three dimensions.
104
90%
80%
70%
60%
50%
40% 81%
30%
20%
10% 19%
0%
Above OECD Average Below OECD Average
Figure 4.37: OECD Average and Financial Literacy

Source: Survey
The average score of 13.7 observed in the OECD survey (2012) across the set of 13
countries is used as a benchmark to compare Haryana with the rest of the world in
Figure 4.37. The average financial literacy score of the Haryana respondents is about
16.1, which is higher than the average observed in the countries in the OCED survey.
Compared to the average score range of 12.4 to 15.1 observed in the countries
included in the OECD survey, these results would imply that the average financial
literacy level of respondents from Haryana is exceedingly good. Relative to the
overall average of the financial literacy score of the OECD survey, the region
performs better than several countries, including South Africa, Armenia, Poland,
Estonia, and Albania.
Figure 4.38 exhibits the financial literacy scores of all the respondents on the basis of
region. In the high financial literacy category, the maximum proportion is of Sirsa
respondents (55 per cent) followed by Fatehabad with 41 per cent respondents, Hisar
with 38 per cent respondents, Bhiwani with 35 per cent respondents. The least per
centage in this category is 14 per cent that belongs to Rohtak residents. In the low
financial literacy category, the highest proportion is 43 per cent that belongs to
Rohtak and the lowest is 3 per cent that belongs to Sirsa. The results depict identical
results in the moderate financial literacy category in almost all the regions. Overall,
the survey reports high level of financial literacy among the respondents of Sirsa,
105
Hisar, Fatehabad and Bhiwani respondents in comparison to the respondents from
Rohtak. Rohtak residents display poor financial literacy that may be accredited to the
low level of financial knowledge possessed by them and their negative attitude
towards savings and financial planning.
100%
90%
80% 45% 46% 45% 43% 42%
70%
3% literacy
50% 13% 17%
20% Low level of Financial literacy
40%
43%
30% 55%
20% 35% 41% 38% High level of financial literacy
10% 14%
0%
Region
Figure 4.38: Region and Financial Literacy

Source: Survey
100%
90%
80% 42% 46%
70%
50% literacy
17%
40% 21% Low level of Financial literacy
30%
20% 41% 34% High level of financial literacy
10%
0%
Female Male
Gender
Figure 4.39: Gender and Financial Literacy

Source: Survey
Figure 4.39 displays the financial literacy scores of all the respondents on the basis of
their gender. The results show that in the high financial literacy category, the presence
of female respondents is 41 per cent which is higher than the presence of female
respondents (34 per cent). In the low financial literacy category, the proportion of
female respondents is 17 per cent and of the male respondents is 21 per cent.
106
Overall, the survey results are inconsistent with the earlier findings that report low
level of financial literacy among women relative to men (Lusardi and Mitchell, 20114;
Ansong & Gyensare, 2012)5. The evidences on the basis of whole sample exhibit that
women have high level of financial literacy men. These gender differences could be
due to the better financial knowledge and financial attitude of female respondents of
the whole sample relative to the male respondents.
100%
90%
80% 39% 47%
70%
50% literacy
24% 17%
30%
20% 36% 37% High level of financial literacy
10%
0%
Rural Urban
Domicile
Figure 4.40: Domicile and Financial Literacy

Source: Survey
Figure 4.40 represents the financial literacy scores of the respondents on the basis of
financial literacy. The results show the presence of slightly higher urban respondents
with a marginal difference of 1 per cent than the rural respondents in the positive
financial literacy category. However, a significant difference is visible in their relative
proportion in the low financial literacy category. In this category, the urban
respondents underscore the rural respondents by seven per cent.
Overall, the survey indicates that urban people are more likely to have better financial
literacy then the rural ones. Though rural respondents display better financial attitude,
the low financial literacy may be because of their less knowledge of financial
concepts as well as negative behaviour in dealing with personal finance relative to the
urban counterparts.
their marital status. The results show that there is significant difference in the
financial literacy level of married and single respondents. In the high financial literacy
category, the proportion of married respondents is 41 per cent which is much higher
107
than the single respondents whose proportion is 23 per cent in this category. The
results depict that 42 per cent of married respondents and 52 per cent single
respondents appear in the moderate financial literacy category. In the low financial
literacy category, the proportion of married respondents is 17 per cent while it is 25
per cent for the single respondents.
Overall, the survey indicates that the married respondents score significantly more
than the single respondents on the overall measure of financial literacy. Similar
findings have also been reported by other studies (de Bassa Scheresberg, Lusardi and
Yakoboski, 2014)6. Married respondents have shown better performance on all the
three aspects of financial literacy i.e. financial knowledge, financial attitude and
financial behaviour relative to single respondents. Perhaps, increased family
responsibilities make the people more conscious of their financial future. They feel
the need to improve their financial knowledge and also to change the attitude and
behaviour towards savings, investment and consumption and other financial matters
for securing their financial future.
100%
90%
80% 42%
70% 52%
50% literacy
17%
25%
30%
20% 41% High level of financial literacy
10% 23%
0%
Married Single
Marital Status
Figure 4.41: Marital Status and Financial Literacy

Source: Survey
Figure 4.42 shows the financial literacy scores of the respondents on the basis of their
age. The results show that in the high financial literacy category, the highest score (46
per cent) is gained by the two age groups 40-49 and 50-59, followed by the age group
above 60 with a minimal difference of 2 per cent. The proportion of the age group 30-
39 is 40 per cent and the lowest financial literacy level is shown by the age group
Below 30. The results reveal that in the low financial literacy category, the highest
108
proportion (25 per cent) is represented by age group of below 30. The findings
suggest that the respondents who are above 40 years of age have higher financial
literacy than the respondents who fall in the age group of 30-39 and Below 30. The
most vulnerable group is ‘below 30’age group and the reason of low financial literacy
might be due to their consistent low scores of these respondents on all the three
dimensions of financial literacy.
Overall, the survey indicates that the level of financial literacy improves with age.
Perhaps due to the greater exposure of people falling in high age group, their
understanding level as well as behaviour inclined towards positivity and improve their
level of financial literacy.
100%
90%
80% 40% 41% 40% 44% 51%
70%
50% 13% 14% literacy
19% 12%
25%
30%
20% 40% 46% 46% 44% High level of financial literacy
10% 24%
0%
30-39 40-49 50-59 Above 60 Below 30
Age Group
Figure 4.42: Age Group and Financial Literacy

Source: Survey
Figure 4.43 displays the financial literacy score of respondents on the basis of their
education. In the high financial literacy category, the proportion of post graduate
respondents is 39 per cent and the graduates are slightly behind them with 38 per cent
proportion. However, the respondents with senior secondary or lower education are
the lowest performers with 31 per cent respondents in this category. The results
suggest that education tends to improve the financial literacy level of the people. In
the survey, 16 per cent of postgraduates, 19 per cent of graduates and 26 per cent of
lower educated group appear in the category of low financial literacy.
Overall, the survey indicates that there is positive association between education and
financial literacy performance of the respondents. The financial literacy tends to
improve with higher education. However, no significant difference is evident in the
109
financial literacy level of graduates and post graduates. They tend to outperform those
with lower education on financial literacy aspect which could be due to their better
behaviour and knowledge of financial matters relative to the respondents with senior
secondary or below educational qualification.
100%
90%
80% 43% 45% 43%
70%
60%
Moderate level of financial
50% 19% 16%
40% 26% literacy
20% 38% 39% 31%
10%
0% High level of financial literacy
or below Senior
Secondary
Education Level
Figure 4.43: Education Level and Financial Literacy

Source: Survey
100%
90%
80% 42% 48% 47%
70%
50% 16% literacy
40% 22% 24%
Low level of Financial literacy
30%
20% 42%
31% 29%
10% High level of financial literacy
0%
employment
Work Situation
Figure 4.44: Work Situation and Financial Literacy

Source: Survey
Figure 4.44 exhibits the financial literacy scores of the respondents on the basis of
their work situation. The results show that a large proportion of respondents who are
in paid employment display high level of financial literacy in comparison to other
respondents. In the low financial literacy category, the proportion of in paid
employees (16 per cent) is lower than the proportion of not working respondents and
self employed respondents.
110
Overall, the survey indicates that work situation of the respondents seems to influence
their level of financial literacy. The respondents who are in paid employment score
significantly higher than the other respondents on the overall measure of financial
literacy. The reason may be the financial discussions among the colleagues at the
work place and greater exposure to financial products because of tax considerations.
100%
90%
80% 35%
70% 51% 53% 56%
60% 12%
50%
40% 31% 15% Moderate level of financial
30% 52% 30%
20% 28% literacy
10% 19% 17%
High level of financial literacy
Income Level
Figure 4.45: Income Level and Financial Literacy

Source: Survey
their income. The results show that income has a positive effect on the financial
literacy level of the respondents. In the high financial literacy category, the maximum
number of respondents belongs to the income level of more than `30000. However,
this proportion is declining with fall in income of the respondents as it is 28 per cent
for the income level of `20000-30000, 17 per cent for the income level of `10000-
20000 and 19 per cent for the income level of less than `10000. In the low financial
literacy level, the proportion of income level of more than `30000 is the lowest i.e. 10
per cent and of the income level of less than `10000 is the highest i.e. 31 per cent.
Overall, the survey indicates that the respondents in the higher income groups are
more financially literate than those in lower income groups. This might be due to less
desirable behaviour of these people like fewer savings, no financial planning and less
understanding of financial aspects due to limited financial resources. They possess
higher financial knowledge, depict better financial behaviour and show positive
attitude towards financial matters.
111
100%
90%
80% 41%
70% 56%
50% 16% literacy
30% 30%
20% 43% High level of financial literacy
10% 14%
0%
No Yes
Income Stability
Figure 4.46: Income Stability and Financial Literacy

Source: Survey
Figure 4.46 displays the financial literacy scores of the respondents on the basis of
stability of their income. The findings demonstrate a wide disparity in the level of
financial literacy of the respondents on the basis of stability and regularity of their
income. 43 per cent of the respondents in stable income group score high on financial
literacy whereas the proportion is merely 14 per cent for the respondents whose
income is unstable. However, in the low financial literacy category, the proportion is
16 per cent for stable income group and 30 per cent for unstable income group. The
result suggests that people whose income is stable are more conscious of financial
matters and are comparatively highly financially literate than the respondents whose
income is unstable.
Overall, the survey indicates that respondents with stable income significantly
outperform the unstable income respondents in all the dimensions of financial literacy
i.e. financial knowledge, financial behaviour and financial attitude and score high on
financial literacy.
4.5 Dummy Variable Regression Analysis
Existing literature on financial literacy documents various determinants of financial

literacy and investment behaviour. It is useful to undertake dummy variable
regression analysis to understand the full picture. We have therefore run a dummy
variable regression analysis for getting some deeper insights of the association
between financial literacy and various demographic factors by taking each score, i.e.
financial literacy, financial knowledge, financial attitude and financial behaviour as
112
the dependent variable. In this dummy variable model, the independent variables are
gender, domicile, marital status, work situation, age, education, income and income
stability of the respondent.
While conducting the dummy variable regression analysis, respondents are bifurcated
into graduation & above and below graduation categories on the basis of education;
while on the basis of age, they are categorized into two classes: respondents aging
more than 40 years and respondents aged 40 years & below. Similarly, two categories
regarding Income level of respondents are formed: respondents having income less
than or equal to `20000 p.m. and those who have a monthly income of more than
`20000 p.m. Further, respondents are segregated into respondents who are in-paid
employment and others on the basis of their occupation.
Table 4.4: Factors Influencing Respondents’ Financial Knowledge
Financial Knowledge Coefficients Standard Error t Stat P-value
Intercept 9.577*** 0.247 38.715 0.000
GENDER 0.006 0.212 0.027 0.979
AREA -0.445* 0.231 -1.930 0.054
MARITAL STATUS -0.079 0.265 -0.297 0.767
AGE -0.591** 0.244 -2.421 0.016
EDUCATION -0.624** 0.288 -2.166 0.031
WORK SITUATION -0.281 0.233 -1.207 0.228
INCOME -1.155*** 0.247 -4.668 0.000
STABILITY -0.419 0.274 -1.527 0.127

***significant at 1 per cent level of significance, **significant at 5 per cent level of significance,
*significant at 10 per cent level of significance
Source: Survey
Table 4.4 shows regression results of factors influencing respondent’s financial

knowledge. The findings report that the average financial knowledge scores of a rural
respondent is lower by about 0.445 as compared to average financial knowledge score
of an urban respondent which is a reference category here, holding all other variables
constant. The results also show that the respondents below 40 years are less
knowledgeable than the elderly ceteris paribus. The greater experience of elderly
113
people of dealing in financial transactions might have improved their financial
knowledge. Furthermore, education seems to be a significant determinant of financial
knowledge as the scores of the respondents who are under graduates are lower by
about 0.624 than the respondents with higher educational qualification. Numeracy and
the cognitive abilities tend to improve with education and these abilities are positively
associated with financial knowledge. This could have been the reason of better
financial knowledge of high educated people. Income of the respondent emerges as
the most significant factor affecting the financial knowledge of the people probably
because people in high income group are more involved in saving, spending, investing
and other financial transactions to dispose their surplus income. However, the results
find no gender differences in the financial knowledge. Marital status and work
situation could not emerge as significant determinants of financial knowledge.
Table 4.5: Factors Influencing Respondents’ Financial Attitude
Financial Attitude Coefficients Standard Error t Stat P-value
Intercept 3.325*** 0.111 29.991 0.000
GENDER 0.186* 0.095 1.956 0.051
AREA 0.167 0.103 1.614 0.107
MARITAL STATUS 0.084 0.119 0.706 0.481
AGE -0.392*** 0.109 -3.583 0.000
EDUCATION 0.697*** 0.129 5.405 0.000
WORK SITUATION -0.001 0.104 -0.012 0.990
INCOME -0.385*** 0.111 -3.471 0.001
STABILITY -0.300*** 0.123 -2.438 0.015

Source: Survey
Table 4.5 indicates regression results of factors influencing respondent’s financial

attitude. The results show that the score of respondents who are below 40 years of age
is lower than the respondents who are 40 years and above. Respondents who have
higher income earn high scores than the respondents who fall in low income group.
Further, stability of income emerges as significant determinant of financial attitude of
the respondents. Surprising to note, that less educated have positive financial attitude
114
than the respondents who are highly educated. No significant difference was found in
the financial knowledge of men and women.
Table 4.6 shows regression results of factors influencing respondent’s financial

behaviour. The findings exhibit that work situation and stability of income are the
important factors influencing the financial behaviour. The financial behaviour of the
respondents who are not working or are self-employed is 0.288 lower than the
respondents who are in-paid employment, other things being equal. It may be due to
healthy discussions regarding financial aspects among the colleagues and also concern
about savings and investments for minimising tax liabilities. The findings also depict
that the financial behaviour of the respondents whose income is stable is better than
those having unstable income. Stable income creates a sense of financial security in
the mind of the people and has a positive bearing on their financial decisions.
Probably, this is the reason of better behaviour shown by stable income people
comparative to unstable ones.
Table 4.6: Factors Influencing Respondents’ Financial Behaviour
Financial Behaviour Coefficients Standard Error t Stat P-value
Intercept 5.046*** 0.120 41.903 0.000
GENDER -0.008 0.103 -0.075 0.940
AREA 0.007 0.112 0.060 0.952
MARITAL STATUS -0.165 0.129 -1.283 0.200
AGE -0.077 0.119 -0.652 0.515
EDUCATION -0.220 0.140 -1.569 0.117
WORK SITUATION -0.288** 0.113 -2.548 0.011
INCOME -0.095 0.120 -0.791 0.429
STABILITY -0.309** 0.133 -2.315 0.021
Source: Survey
115
Table 4.7: Factors Influencing Respondents’ Financial Literacy
Financial Literacy Coefficients Standard Error t Stat P-value
Intercept 17.949*** 0.317 56.579 0.000
GENDER 0.184 0.272 0.676 0.499
AREA -0.272 0.296 -0.918 0.359
MARITAL STATUS -0.160 0.339 -0.472 0.637
AGE -1.061*** 0.313 -3.387 0.001
EDUCATION -0.146 0.369 -0.396 0.692
WORK SITUATION -0.571* 0.298 -1.913 0.056
INCOME -1.635*** 0.317 -5.154 0.000
STABILITY -1.027*** 0.352 -2.922 0.004
Source: Survey
Table 4.7 indicates regression results of factors influencing respondent’s financial

literacy. The results show that the young participants are less financially literate than
the older participants. On average, high income respondents score high then low
income respondents. The empirical findings also reveal that men do not score higher
than women on financial literacy scale, ceteris paribus. Likewise, it is curious to note
that married and single respondents do equally better in the financial matters. There is
no significant difference in the financial literacy scores of rural and urban
respondents. One of the vital factors, education is also unable to bring any significant
difference in the financial literacy level of the respondents. Though education brings a
significant difference in the financial knowledge of the respondent but is insignificant
in changing the attitude and behaviour of the respondents. Thus, empirical evidences
suggest that Gender, Marital Status, Education and domicile remain insignificant
factors in explaining the financial literacy of respondents in the Haryana region even
after controlling for other factors.
Overall, the results demonstrate that the respondents with higher income perform
significantly better than the respondents having low income. They possess high
financial knowledge and are also having sensible financial attitude than their
counterparts. This might be due to less desirable behaviour of the people with low
116
income like fewer savings, no financial planning and less understanding of financial
aspects due to limited financial resources. Furthermore, it appears from empirical
evidences that stability of income of respondents is an important factor in determining
their financial literacy score as stable income participants score higher on financial
attitude aspect, financial behaviour aspect as well as on overall financial literacy
aspect than people with unstable income. The respondents who are in paid
employment perform better than others. The reason may be the financial discussions
among the colleagues at the work place and greater exposure to financial products
because of tax considerations. Age also appears as a significant factor as people
falling in high age brackets perform better than people belonging to low age groups.
This could be largely due to that increased experience of financial dealings improves
the decision making ability of these people.
117
References
1. Atkinson, A., & Messy, F. A. (2012). Measuring financial literacy: Results of the
OECD International Network on Financial Education (INFE) Pilot Study. OECD
Working Papers on Finance, Insurance and Private Pensions, (15). OECD
Publishing. http://dx.doi.org/10.1787/5k9csfs90fr4-en
2. Agarwalla, S. K., Barua, S., Jacob, J., & Varma, J. R. (2012). A survey of
financial literacy among students, young employees and the retired in
India. Retrieved from http://www.iimahd.ernet.in/fls/youngemployessandretired
2012.pdf
3. MasterCard, (2014). MasterCard Index of Financial Literacy Index Report 2014

H1. Retrieved from http://www1.mastercard.com/content/intelligence/en/ research
/reports/2015/mastercard-financial-literacy-index-report-2014h1.html
4. Lusardi, A., & Mitchell, O. S. (2011). Financial Literacy around the World: An
Overview (No. w17107). National Bureau of Economic Research. Retrieved from
http://www.nber.org/papers/w17107.pdf?new_ window=1
5. Ansong, A., & Gyensare, M. A. (2012). Determinants of university working-

students’ financial literacy at the University of Cape Coast, Ghana. International
Journal of Business and Management, 7(9), 126-133. Retrieved from
ccsenet.org/journal/index.php/ijbm/article/download/14646/11174
6. de Bassa Scheresberg, C., Lusardi, A., & Yakoboski, P. J. (2014). Working

women’s financial capability: An analysis across family status and career
stages. 2014b. TIAA-CREF Institute. Retrieved from https://www.tiaacrefinstitute.
org/public/pdf/working_womens_financial_capability.pdf
118

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CHAPTER-4

4.1 Financial Knowledge Analysis

4.1.1 Financial Knowledge Score

The level of financial knowledge possessed by the respondents is analysed on the

Figure 4.1: Overall Financial Knowledge

Figure 4.2: Region and Financial Knowledge

90% 22% 27%

Figure 4.3: Gender and Financial Knowledge

Figure 4.4: Domicile and Financial Knowledge

Figure 4.5: Marital Status and Financial Knowledge

90% 18% 18%

Figure 4.6: Age Group and Financial Knowledge

90% 25% 25% 26%

Figure 4.7: Education Level and Financial Knowledge

Overall, the survey indicates that education is a significant determinant of the

90% 25% 25% 26%

Figure 4.8: Work Situation and Financial Knowledge

90% 25% 20% 27%

Figure 4.9: Income Level and Financial Knowledge

Figure 4.10: Income Stability and Financial Knowledge

Time value of money Calculation of interest

Impact of inflation Compound Interest

Figure 4.11: Question-wise Performance on Domains of Financial Knowledge

4.2 Financial Attitude Analysis

Financial attitude is an important element of financial literacy which has an influence

4.2.1 Financial Attitude Score

A total of three items as recommended by OECD, viz. preference to save and to

Table 4.2: Financial Attitude Score

The attitudinal statements sought response in terms of degree of agreement or

Figure 4.12: ‘Money is there only to be spent’

Figure 4.15: Overall Financial Attitude

Figure 4.16: Region and Financial Attitude

Figure 4.17: Gender and Financial Attitude

Figure 4.18: Domicile and Financial Attitude

Figure 4.19: Marital Status and Financial Attitude

Figure 4.20: Age Group and Financial Attitude

Figure 4.21: Education Level and Financial Attitude

Figure 4.22: Work Situation and Financial Attitude

Figure 4.23: Income Level and Financial Attitude

Percentage of Respondents 100%

Figure 4.24: Income Stability and Financial Attitude

4.3 Financial Behaviour Analysis

Financial behaviour is an indispensable element of financial literacy and probably the

4.3.1 Financial Behaviour Score

Table 4.3: Financial Behaviour Score

Negative financial behaviour

Figure 4.25: Overall Financial Behaviour

Figure 4.26: Region and Financial Behaviour

Figure 4.27: Gender and Financial Behaviour

Percentage of Respondents 100%

Figure 4.28: Domicile and Financial Behaviour

Figure 4.29: Marital Status and Financial Behaviour

Figure 4.30: Age Group and Financial Behaviour

Figure 4.31: Education Level and Financial Behaviour

Figure 4.32: Work Situation and Financial Behaviour

Figure 4.33: Income Level and Financial Behaviour

Percentage of respondents 100%

Figure 4.34: Income Stability and Financial Behaviour

Figure 4.35: Question Wise Performance on Domains of Financial Behaviour

4.4 Financial Literacy Analysis

Financial literacy is the knowledge and understanding of financial matters, positive

4.4.1 Financial Literacy Score

High level of financial literacy